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Definition: Liability

A liability can be termed as an obligation on the company, person etc. In this case the property is not owned by the party and they just take care of it on behalf of past transaction.

In accounting balance sheet the items that are included in liabilities are accounts payable, accruals, loans, equity.  All these terms denotes that the person is obliged and liable for all these terms like paying of debt, shareholder dividends so that these are called liablity

Or in simple terms if X gives Y Rs.100 to keep it in his pocket than that Rs.100 is an Asset for X and Liability for Y.

In a balance sheet assets are always equal to liabilities.

Liabilities are also of two types and they are as follows:

  • Current liabilities: These are the liabilities which are to be paid within a year.
  • Long term liabilities or non-current liability: The liabilities which are due for more than 1 year are termed as non-current liability.

Hence, this concludes the definition of Liability along with its overview.

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